Monday, April 30, 2018

Tuesday: ISM Manufacturing, Construction Spending, Auto Sales

by Bill McBride on 4/30/2018 07:52:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Mostly Sideways to Begin Busy Week

Mortgage rates didn't move much today, which keeps them right in line with last week's lowest levels. That sounds pretty good! Unfortunately, any time prior to last week, those "lowest levels" would have been the highest in more than 4 years. [30YR FIXED - 4.625%-4.75%]
emphasis added
Tuesday:
• At 10:00 AM ET, ISM Manufacturing Index for April. The consensus is for the ISM to be at 58.7, down from 59.3 in March. The PMI was at 59.3% in March, the employment index was at 57.3%, and the new orders index was at 61.9%.

• Also at 10:00 AM, Construction Spending for March. The consensus is for a 0.5% increase in construction spending.

• All day, Light vehicle sales for April. The consensus is for light vehicle sales to be 17.2 million SAAR in March, down from 17.4 million in March (Seasonally Adjusted Annual Rate).

Fannie Mae: Mortgage Serious Delinquency rate decreased in March

by Bill McBride on 4/30/2018 04:21:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate decreased to 1.16% in March, down from 1.22% in January. The serious delinquency rate is up from 1.12% in March 2017.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

By vintage, for loans made in 2004 or earlier (3% of portfolio), 3.24% are seriously delinquent. For loans made in 2005 through 2008 (6% of portfolio), 6.22% are seriously delinquent, For recent loans, originated in 2009 through 2018 (91% of portfolio), only 0.51% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

The recent increase in the delinquency rate was due to the hurricanes - no worries about the overall market (These are serious delinquencies, so it took three months late to be counted).

After the hurricane bump, the rate will probably decline to 0.5 to 0.7 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

Energy expenditures as a percentage of PCE

by Bill McBride on 4/30/2018 02:09:00 PM

Note: Back in early 2016, I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the March 2018 PCE report released this morning.

Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through March 2018.

This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices.

Energy Expenditures as Percent of GDP
Click on graph for larger image.

Data source: BEA Table 2.3.5U.

The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.

In March 2018, energy expenditures as a percentage of PCE increased to 4.05% of PCE, up from the all time low two years ago of 3.6%.

Historically this is still a low percentage of PCE for energy expenditures, even though oil prices are up sharply over the last two years (WTI was at $37.55 per barrel in March 2016 and has risen to almost $69 per barrel today).


Earlier: Chicago PMI Increased Slightly in April

by Bill McBride on 4/30/2018 01:10:00 PM

From the Chicago PMI: Chicago Business Barometer Rises to 57.6 in April

The MNI Chicago Business Barometer rose 0.2 points to 57.6 in April, up from 57.4 in March, snapping a three-month downward trend.

Business activity continued to rise at a solid pace in April, with growth in firms’ operations up for the first time this year, albeit marginally. Three of the five Barometer components fell on the month, with only Production and Supplier Deliveries finding room to grow.
...
“While the MNI Chicago Business Barometer ended a threemonth falling streak in April, supply constraints faced by firms intensified and continue to weigh on activity. Longer delivery times are proving attritive, while dearer materials bite further into margins” said Jamie Satchi, Economist at MNI Indicators.

“Uncertainty among suppliers appears to be assisting the upward march in prices, but the majority of firms were optimistic any negative impact stemming directly from recently implemented tariffs would be minimal,” he added.
emphasis added
This was slightly below the consensus forecast of 57.8, but still a decent reading.

Dallas Fed: "Growth in Texas Manufacturing Rebounds Strongly"

by Bill McBride on 4/30/2018 10:37:00 AM

From the Dallas Fed: Growth in Texas Manufacturing Rebounds Strongly

Texas factory activity rose markedly in April after posting slower growth in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, increased 11 points to 25.3.

Other indexes of manufacturing activity also rose sharply in April. The new orders and growth rate of orders indexes jumped to their highest readings this year, 27.9 and 18.9, respectively. The capacity utilization index climbed eight points to 18.7, and the shipments index rose nine points to 19.3.

Perceptions of broader business conditions remained highly positive on net in April. The general business activity index was largely unchanged at 21.8, and the company outlook index edged up four points to 23.6. Both indexes remained far above their average levels.

Labor market measures suggested stronger growth in employment and work hours in April. The employment index came in at 17.8, up six points from March. Twenty-four percent of firms noted net hiring, compared with 6 percent noting net layoffs. The hours worked index moved up four points to 14.3.
emphasis added
This was the last of the regional Fed surveys for April.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through April), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

Based on these regional surveys, it seems likely the ISM manufacturing index will be solid again in April, but probably lower than in March (to be released tomorrow, Tuesday, May 1st).

NAR: Pending Home Sales Index Increased 0.4% in March, Down 3.0% Year-over-year

by Bill McBride on 4/30/2018 10:05:00 AM

From the NAR: Pending Home Sales Move Up 0.4 Percent in March

Pending home sales inched higher for the second consecutive month in March, but unrelenting inventory constraints once again kept overall activity below year ago levels, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, inched up 0.4 percent to 107.6 in March from a downwardly revised 107.2 in February. Even with last month's increase in activity, the index declined on an annualized basis (3.0 percent) for the third straight month.
...
The PHSI in the Northeast fell 5.6 percent to 90.6 in March, and is now 8.1 percent below a year ago. In the Midwest the index rose 2.4 percent to 101.3 in March, but is 6.0 percent lower than March 2017. Pending home sales in the South climbed 2.5 percent to an index of 128.6 in March, and are 0.3 percent higher than last March. The index in the West declined 1.1 percent in March to 94.7, and is 2.2 percent below a year ago.
emphasis added
This was below expectations of a 1.0% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in April and May.

Personal Income increased 0.3% in March, Spending increased 0.4%

by Bill McBride on 4/30/2018 08:36:00 AM

The BEA released the Personal Income and Outlays report for March:

Personal income increased $47.8 billion (0.3 percent) in March according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $39.8 billion (0.3 percent) and personal consumption expenditures (PCE) increased $61.7 billion (0.4 percent).
...
Real PCE increased 0.4 percent. The PCE price index increased less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
The March PCE price index increased 2.0 percent year-over-year and the March PCE price index, excluding food and energy, increased 1.9 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through March 2018 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was slightly below expectations, and the increase in PCE was at expectations.

PCE growth was weak in Q1, however inflation is now near the Fed's target.

Sunday, April 29, 2018

Monday: Personal Income, Chicago PMI, Pending Home Sales

by Bill McBride on 4/29/2018 10:01:00 PM

Weekend:
Schedule for Week of Apr 29, 2018

Monday:
• At 8:30 AM ET, Personal Income and Outlays for March. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for April. The consensus is for a reading of 57.8, up from 57.4 in March.

• At 10:00 AM, Pending Home Sales Index for March. The consensus is for a 1.0% increase in the index.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for April. This is the last of the regional Fed surveys for April.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7, and DOW futures are up 50 (fair value).

Oil prices were mixed over the last week with WTI futures at $67.93 per barrel and Brent at $74.22 per barrel.  A year ago, WTI was at $49, and Brent was at $50 - so oil prices are up about 40% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.81 per gallon. A year ago prices were at $2.39 per gallon - so gasoline prices are up 42 cents per gallon year-over-year.

April 2018: Unofficial Problem Bank list declines to 94 Institutions

by Bill McBride on 4/29/2018 08:31:00 AM

Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for April 2018.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for April 2018. The list had a decline of four insured institutions to 94 banks. Aggregate assets declined during the month by $956 million to $18.9 billion. A year ago, the list held 148 institutions with assets of $36.1 billion.

Actions were terminated against American Bank of the North, Nashwauk, MN ($550 million); Affinity Bank, Atlanta, GA ($260 million); Allied First Bank, SB, Oswego, IL ($94 million); and South Carolina Community Bank, Columbia, SC ($53 million).
CR Note: When the unofficial weekly was list was first published on August 7, 2009 it had 389 institutions. The list peaked at just over 1,000 institutions in 2011. Now there are only 94 banks on the unofficial list (the FDIC reported 95 banks on the official problem bank list at the end of 2017).

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

Saturday, April 28, 2018

Schedule for Week of Apr 29, 2018

by Bill McBride on 4/28/2018 08:11:00 AM

The key report this week is the April employment report on Friday.

Other key indicators include the March Personal Income and Outlays report, March Trade deficit, April ISM manufacturing and non-manufacturing indexes, April auto sales, and the April ADP employment report.

The FOMC meets on Tuesday and Wednesday, and no change to policy is expected.

----- Monday, Apr 30th -----

8:30 AM: Personal Income and Outlays for March. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for April. The consensus is for a reading of 57.8, up from 57.4 in March.

10:00 AM: Pending Home Sales Index for March. The consensus is for a 1.0% increase in the index.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for April. This is the last of the regional Fed surveys for April.

----- Tuesday, May 1st -----

ISM PMI10:00 AM: ISM Manufacturing Index for April. The consensus is for the ISM to be at 58.7, down from 59.3 in March.

Here is a long term graph of the ISM manufacturing index.

The PMI was at 59.3% in March, the employment index was at 57.3%, and the new orders index was at 61.9%.

10:00 AM: Construction Spending for March. The consensus is for a 0.5% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for April. The consensus is for light vehicle sales to be 17.2 million SAAR in March, down from 17.4 million in March (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the March sales rate.

----- Wednesday, May 2nd -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 193,000 payroll jobs added in April, down from 241,000 added in March.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce no change to policy at this meeting.

----- Thursday, May 3rd -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, up from 209 thousand the previous week.

U.S. Trade Deficit 8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through February. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $50.0 billion in March from $57.6 billion in February.

10:00 AM: the ISM non-Manufacturing Index for April. The consensus is for index to decrease to 58.5 from 58.8 in March.

----- Friday, May 4th -----

8:30 AM: Employment Report for April. The consensus is for an increase of 190,000 non-farm payroll jobs added in April, up from the 103,000 non-farm payroll jobs added in March.

Year-over-year change employmentThe consensus is for the unemployment rate to decrease to 4.0%.

This graph shows the year-over-year change in total non-farm employment since 1968.

In March the year-over-year change was 2.261 million jobs.

A key will be the change in wages.

Friday, April 27, 2018

Oil Rigs: "Beginning of Shale's Super-Goldilocks Period?"

by Bill McBride on 4/27/2018 04:05:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Apr 27, 2018:

• Total US oil rigs were up, +5 to 825

• Horizontal oil rigs were up, +11 at 734
...
• The major action again was back in the Permian, +6 horizontal oil rigs

• Cana Woodford added 9 rigs, but is still below its level of earlier this year.

• Vertical oil rigs are at their lowest level since November 2016

• The Brent spread has moved up to $6.50 / barrel – and speaks to ungodly demand strength outside the US

• With the current Brent spread, expect continued upward pressure in oil prices
Oil Rig CountClick on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC."

Freddie Mac: Mortgage Serious Delinquency Rate Decreased in March

by Bill McBride on 4/27/2018 12:36:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in March was 0.97%, down from 1.06% in February. Freddie's rate is up from 0.92% in March 2017.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

The recent increase in the delinquency rate was due to the hurricanes - no worries about the overall market (These are serious delinquencies, so it took three months late to be counted).

After the hurricane bump, maybe the rate will decline to a cycle bottom in the 0.5% to 0.8% range.

Note: Fannie Mae will report for March soon.

Q1 GDP: Investment

by Bill McBride on 4/27/2018 09:32:00 AM

IMPORTANT NOTE: In the GDP report, real residential investment was unchanged in Q1. But residential investment (RI) as a percent GDP actually increased in Q1! How can that be? The answer is that the price index for residential investment increased sharply in Q1 (up 8.5% annualized). The large increase in the residential investment price index follows what we are hearing from home builders - that material costs have increased sharply (the tariffs haven't helped, but other prices are up too). This hurts both builders and home buyers.

The first graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.

In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Investment ContributionsClick on graph for larger image.

Residential investment (RI) was unchanged in Q1 (0.0% annual rate in Q1).  Equipment investment increased at a 4.7% annual rate, and investment in non-residential structures increased at a 12.3% annual rate.

On a 3 quarter trailing average basis, RI (red) is up, equipment (green) is solidly positive, and nonresidential structures (blue) is up slightly.

Recently real RI has been soft.

I'll post more on the components of non-residential investment once the supplemental data is released.

Residential InvestmentThe second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP increased in Q1, and RI has generally been increasing.  RI as a percent of GDP is only just above the bottom of the previous recessions - and I expect RI to continue to increase for the next couple of years.

The increase is now primarily coming from single family investment and home remodeling.

I'll break down Residential Investment into components after the GDP details are released.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

non-Residential InvestmentThe third graph shows non-residential investment in structures, equipment and "intellectual property products".  Investment in equipment - as a percent of GDP - picked up.

BEA: Real GDP increased at 2.3% Annualized Rate in Q1

by Bill McBride on 4/27/2018 08:34:00 AM

From the BEA: Gross Domestic Product: First Quarter 2018 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the first quarter of 2018, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.9 percent.
...
The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed investment, personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the first quarter reflected decelerations in PCE, residential fixed investment, exports, and state and local government spending. These movements were partly offset by an upturn in private inventory investment. Imports, which are a subtraction in the calculation of GDP, decelerated.
emphasis added
The advance Q4 GDP report, with 2.3% annualized growth, was above expectations.

Personal consumption expenditures (PCE) increased at 1.1% annualized rate in Q1, down from 4.0% in Q4 (this is weak).   Residential investment (RI) was unchanged in Q1. Equipment investment increased at a 4.7% annualized rate, and investment in non-residential structures increased at a 12.3% pace.

I'll have more later ...

Thursday, April 26, 2018

Friday: Q1 GDP

by Bill McBride on 4/26/2018 07:11:00 PM

A few GDP forecasts:

From Merrill Lynch:

[T]he data added 0.2pp to 1Q GDP tracking, bringing it up to 1.9% qoq saar heading into tomorrow's advance release. [April 26 estimate].
emphasis added
And from the Altanta Fed: GDPNow
The final GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.0 percent on April 26, unchanged from April 17.[April 17 estimate]
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 2.9% for 2018:Q1 and 3.0% for 2018:Q2. [April 20 estimate]
Friday:
• At 8:30 AM ET, Gross Domestic Product, 1st quarter 2018 (Advance estimate). The consensus is that real GDP increased 2.0% annualized in Q1, down from 2.9% in Q4.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for April). The consensus is for a reading of 98.0, up from 97.8.

Vehicle Sales Forecast: Sales Around 17 Million SAAR in April

by Bill McBride on 4/26/2018 05:48:00 PM

The automakers will report April vehicle sales on Tuesday, May 1st.

Note: There were 24 selling days in April 2018, down from 26 in April 2017.

From WardsAuto: U.S. Light-Vehicle Forecast: April Sets Stage for Strong Q2

The Wards Intelligence forecast calls for U.S. automakers to deliver 1.35 million light vehicles in April. ... The report puts the seasonally adjusted annual rate of sales for the month at 17.1 million units, below last month’s 17.4 million but slightly above year-ago’s 17.0
emphasis added
It appears April will be another solid month.  So far sales in 2018 are running at about the same rate as in 2017.

Zillow Case-Shiller Forecast: More Solid House Price Gains in March

by Bill McBride on 4/26/2018 02:38:00 PM

The Case-Shiller house price indexes for February were released Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Aaron Terrazas at Zillow: February Case-Shiller Results and March Forecast: Home Prices Pushed Higher by Inventory Crunch

The kind of sustained, rapid home price growth we’ve been seeing in Case-Shiller and other indices for the past few years is enough to give home buyers of all stripes a headache. And don’t expect things to slow down any time soon.
...
The pain this rapid growth is causing is widespread, but is especially acute for first-time and lower-income buyers at the bottom end of the market in search of entry-level homes that are appreciating the fastest, in large part because they are in the most demand.

Competition is fierce, offer windows are short and tensions will inevitably run high for many buyers as the spring shopping season unfolds.

More inventory is the one cure sure to take this edge off, and there are some faint signals in more recent data that a shift may be coming – inventory of existing homes has risen for the past three months, and construction activity is at its highest point in a decade.

But buyers in the market now shouldn’t hold their breath. Even if inventory does begin to recover, it will be rising from incredibly low levels and will likely take years to get back to a more ‘normal’ level.

Zillow predicts the March S&P/Case-Shiller U.S. national index, which will not be released until May 29, will climb 6.5 percent year-over year.
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be larger in March than in February.
Zillow forecast for Case-Shiller

Kansas City Fed: Regional Manufacturing Activity "Expanded More Rapidly" in April

by Bill McBride on 4/26/2018 11:00:00 AM

From the Kansas City Fed: Tenth District Manufacturing Activity Expanded More Rapidly

The Federal Reserve Bank of Kansas City released the April Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded more rapidly in April, and optimism remained high for future activity.

“Factory activity accelerated in April despite concerns among many firms about changes in international trade policy,” said Wilkerson. “Price indexes also continued to rise.”
...
The month-over-month composite index was 26 in April, up from readings of 17 in March and 17 in February. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory activity accelerated at both durable and nondurable goods plants, particularly for machinery, plastics, and chemicals. Month-over-month indexes increased considerably. The production index jumped from 20 to 33, and the shipments, new orders, and order backlog indexes also rose. The employment and new orders for exports indexes were unchanged. The raw materials inventory index increased from 11 to 17, while the finished goods inventory index fell slightly.
emphasis added
So far most of the regional Fed surveys have been solid in April, although Richmond showed some slowing.

HVS: Q1 2018 Homeownership and Vacancy Rates

by Bill McBride on 4/26/2018 10:06:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q1 2018.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate was unchanged at 64.2% in Q1, from 64.2% in Q4.

I'd put more weight on the decennial Census numbers - and given changing demographics, the homeownership rate has probably bottomed.

Homeowner Vacancy RateThe HVS homeowner vacancy decreased to 1.5% in Q1. 

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

Rental Vacancy RateThe rental vacancy rate increased to 7.0% in Q1.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

Overall this suggests that vacancies have declined significantly, and my guess is the homeownership rate has bottomed - and that the rental vacancy rate has bottomed for this cycle.

Weekly Initial Unemployment Claims decrease to 209,000

by Bill McBride on 4/26/2018 08:33:00 AM

The DOL reported:

In the week ending April 21, the advance figure for seasonally adjusted initial claims was 209,000, a decrease of 24,000 from the previous week's revised level. This is the lowest level for initial claims since December 6, 1969 when it was 202,000. The previous week's level was revised up by 1,000 from 232,000 to 233,000. The 4-week moving average was 229,250, a decrease of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 231,250 to 231,500.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
emphasis added
The previous week was revised up.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 229,250.

This was lower than the consensus forecast. The low level of claims suggest relatively few layoffs.

Wednesday, April 25, 2018

Thursday: Unemployment Claims, Durable Goods, Housing Vacancies and Homeownership

by Bill McBride on 4/25/2018 08:17:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, down from 232 thousand the previous week.

• Also at 8:30 AM, Durable Goods Orders for March from the Census Bureau. The consensus is for a 1.7% increase in durable goods orders.

• At 10:00 AM, the Q1 2018 Housing Vacancies and Homeownership from the Census Bureau.

• At 11:00 AM, the Kansas City Fed manufacturing survey for March.

NMHC: Apartment Market Tightness Index remained negative for Tenth Consecutive Quarter

by Bill McBride on 4/25/2018 02:29:00 PM

From the National Multifamily Housing Council (NMHC): April NMHC Quarterly Survey Shows Greater Supply Improving Affordability

Apartment market conditions were uneven, according to results from the April National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions. The Market Tightness (38), Sales Volume (43) and Debt Financing (36) Indexes landed below the breakeven level of 50, while the Equity Financing Index decreased to 54.

“Apartment markets continue to send mixed signals,” said NMHC Chief Economist Mark Obrinsky. “While respondents indicated more markets are loosening than tightening, this was focused in markets that have experienced greater supply. So, the message is clear, if unsurprising: Increasing supply improves affordability.”

The Market Tightness Index increased two points to 38. This was the tenth consecutive quarter of overall declining conditions. Thirty-eight percent of respondents reported looser market conditions than three months prior, compared to only 14 percent who reported tighter conditions. Meanwhile, nearly half of respondents (47 percent) felt that conditions were no different from last quarter.
emphasis added
Apartment Tightness Index
Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

This is the tenth consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.

Update: A few comments on the Seasonal Pattern for House Prices

by Bill McBride on 4/25/2018 01:40:00 PM

CR Note: This is a repeat of earlier posts with updated graphs.

A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.

For in depth description of these issues, see former Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"

Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

House Prices month-to-month change NSA Click on graph for larger image.

This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through February 2018).   The seasonal pattern was smaller back in the '90s and early '00s, and increased once the bubble burst.

The seasonal swings have declined since the bubble.

Case Shiller Seasonal FactorsThe second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust.

The swings in the seasonal factors has started to decrease, and I expect that over the next several years - as the percent of distressed sales declines further and recent history is included in the factors - the seasonal factors will move back towards more normal levels.

However, as Kolko noted, there will be a lag with the seasonal factor since it is based on several years of recent data.

Philly Fed: State Coincident Indexes increased in 47 states in March

by Bill McBride on 4/25/2018 11:29:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2018. Over the past three months, the indexes increased in 49 states and decreased in one, for a three-month diffusion index of 96. In the past month, the indexes increased in 47 states, decreased in one, and remained stable in two, for a one-month diffusion index of 92.
emphasis added
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Philly Fed State Conincident MapClick on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all or mostly green during most of the recent expansion.

Once again, the map is mostly green on a three month basis.

Source: Philly Fed.

Note: For complaints about red / green issues, please contact the Philly Fed.

Philly Fed Number of States with Increasing ActivityAnd here is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In March, 48 states had increasing activity (including minor increases).

The downturn in 2015 and 2016, in the number of states increasing, was mostly related to the decline in oil prices.

Chemical Activity Barometer "Eases" in April

by Bill McBride on 4/25/2018 09:50:00 AM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Eases Following Six Consecutive Monthly Gains; Trends Suggest Growth into Early 2019

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), slipped 0.1 percent in April to 121.6 percent on a three-month moving average (3MMA) basis. This follows six consecutive monthly gains and a dip from the barometer’s highest point since modeling began. The barometer remains up 3.8 percent on a 3MMA compared to a year earlier.
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
Chemical Activity Barometer Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

The year-over-year increase in the CAB has been solid over the last year, suggesting further gains in industrial production in 2018.

MBA: Mortgage Applications Decrease Slightly in Latest Weekly Survey

by Bill McBride on 4/25/2018 07:00:00 AM

From the MBA: Mortgage Applications Slightly Decrease in Latest MBA Weekly Surve

Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 20, 2018.

... The Refinance Index decreased 0.3 percent from the previous week. The seasonally adjusted Purchase Index was unchanged from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 11 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since September 2013, 4.73 percent, from 4.66 percent, with points increasing to 0.49 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall 50 bps or more from the recent level.



Mortgage Purchase Index The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 11% year-over-year.

Tuesday, April 24, 2018

"Mortgage Rates Push Farther Into 4-Year Highs"

by Bill McBride on 4/24/2018 09:26:00 PM

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Push Farther Into 4-Year Highs

Mortgage rates moved somewhat higher again today, thus pushing them farther into the highest levels in more than 4 years. [30YR FIXED - 4.625%-4.75%]
emphasis added
Here is a table from Mortgage News Daily:

U.S. Demographics: Largest 5-year cohorts, and Ten most Common Ages in 2017

by Bill McBride on 4/24/2018 05:17:00 PM

IMPORTANT NOTE: The data below is based on the Census 2017 estimates. Housing economist Tom Lawler has pointed out some questions about the Census estimates, see: Lawler: "New Long-Term Population Projections Show Slower Growth than Previous Projections but Are Still Too High"

Four years ago, I wrote: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group.

In 2016, I followed up with Largest 5-year Population Cohorts are now "20 to 24" and "25 to 29" and U.S. Demographics: Ten most common ages in 2010, 2015, 2020, and 2030.

Note: For the impact on housing, also see: Demographics: Renting vs. Owning

Last week the Census Bureau released the population estimates for 2017, and I've updated the table from the previous post (replacing 2015 with 2017 data).

The table below shows the top 11 cohorts by size for 2010, 2017 (released this month), and Census Bureau projections for 2020 and 2030.

By the year 2020, 8 of the top 10 cohorts will be  under 40 (the Boomers will be fading away), and by 2030 the top 11 cohorts will be the youngest 11 cohorts (the reason I included 11 cohorts).

There will be plenty of "gray hairs" walking around in 2020 and 2030, but the key for the economy is the population in the prime working age group is now increasing.

This is positive for housing and the economy.

Population: Largest 5-Year Cohorts by Year
Largest
Cohorts
2010201720202030
145 to 49 years25 to 29 years25 to 29 years35 to 39 years
250 to 54 years20 to 24 years30 to 34 years40 to 44 years
315 to 19 years55 to 59 years35 to 39 years30 to 34 years
420 to 24 years30 to 34 yearsUnder 5 years25 to 29 years
525 to 29 years50 to 54 years55 to 59 years5 to 9 years
640 to 44 years35 to 39 years20 to 24 years10 to 14 years
710 to 14 years15 to 19 years5 to 9 yearsUnder 5 years
85 to 9 years45 to 49 years60 to 64 years15 to 19 years
9Under 5 years10 to 14 years15 to 19 years20 to 24 years
1035 to 39 years5 to 9 years10 to 14 years45 to 49 years
1130 to 34 years60 to 64 years50 to 54 years50 to 54 years

2016 Population by Age
Click on graph for larger image.

This graph, based on the 2017 population estimate, shows the U.S. population by age in July 2017 according to the Census Bureau.

Note that the largest age groups are all in their mid-20s.

And below is a table showing the ten most common ages in 2010, 2017, 2020, and 2030 (projections are from the Census Bureau).

Note the younger baby boom generation dominated in 2010.  By 2017 the millennials have taken over.  And by 2020, the boomers are off the list.

My view is this is positive for both housing and the economy, especially in the 2020s.

Population: Most Common Ages by Year
  2010201720202030
150262939
249273040
320252838
419282737
547243136
646232635
748573241
851292530
918563534
1052323433

Real House Prices and Price-to-Rent Ratio in February

by Bill McBride on 4/24/2018 02:20:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 6.3% year-over-year in February

It has been eleven years since the bubble peak. In the Case-Shiller release this morning, the seasonally adjusted National Index (SA), was reported as being 8.2% above the previous bubble peak. However, in real terms, the National index (SA) is still about 10.8% below the bubble peak (and historically there has been an upward slope to real house prices).

The year-over-year increase in prices is mostly moving sideways now around 6%. In February, the index was up 6.3% YoY.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $284,000 today adjusted for inflation (42%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through February) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA)and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

Real House PricesThe second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to November 2004 levels, and the Composite 20 index is back to May 2004.

In real terms, house prices are back to 2004 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to February 2004 levels, and the Composite 20 index is back to November 2003 levels.

In real terms, prices are back to mid 2004 levels, and the price-to-rent ratio is back to late 2003, early 2004 - and the price-to-rent ratio has been increasing slowly.

A few Comments on March New Home Sales

by Bill McBride on 4/24/2018 11:44:00 AM

New home sales for March were reported at 694,000 on a seasonally adjusted annual rate basis (SAAR). This was well above the consensus forecast, and the three previous months were revised up, combined.

Earlier: New Home Sales increase to 694,000 Annual Rate in March.

New Home Sales 2016 2017Click on graph for larger image.

This graph shows new home sales for 2017 and 2018 by month (Seasonally Adjusted Annual Rate).

Sales are up 10.3% through March compared to the same period in 2017. Solid growth, and the next five months will be an easy comparison to 2017.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years.

Distressing GapThe "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through March 2018. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.

I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

Distressing GapAnother way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down since the housing bust, and this ratio will probably continue to trend down over the next several years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

New Home Sales increase to 694,000 Annual Rate in March

by Bill McBride on 4/24/2018 10:14:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 694 thousand.

The previous three months were revised up, combined.

"Sales of new single-family houses in March 2018 were at a seasonally adjusted annual rate of 694,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.0 percent above the revised February rate of 667,000 and is 8.8 percent above the March 2017 estimate of 638,000."
emphasis added
New Home SalesClick on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

New Home Sales, Months of SupplyThe months of supply decreased in March to 5.2 months from 5.4 months in February.

The all time record was 12.1 months of supply in January 2009.

This is at the top end of the normal range (less than 6 months supply is normal).
"The seasonally-adjusted estimate of new houses for sale at the end of March was 301,000. This represents a supply of 5.2 months at the current sales rate."
New Home Sales, InventoryOn inventory, according to the Census Bureau:
"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."
Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSAThe last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2018 (red column), 68 thousand new homes were sold (NSA). Last year, 61 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was well above expectations of 630,000 sales SAAR, and the previous months were revised up, combined. I'll have more later today.

Case-Shiller: National House Price Index increased 6.3% year-over-year in February

by Bill McBride on 4/24/2018 09:14:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: S&P CoreLogic Case-Shiller Home Prices: Cities in the West Continue to Lead Housing Momentum

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.3% annual gain in February, up from 6.1% in the previous month. The 10-City Composite annual increase came in at 6.5%, up from 6.0% in the previous month. The 20-City Composite posted a 6.8% year-over-year gain, up from 6.4% in the previous month.

Seattle, Las Vegas, and San Francisco continue to report the highest year-over-year gains among the 20 cities. In February, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with an 11.6% increase and San Francisco with a 10.1% increase. Thirteen of the 20 cities reported greater price increases in the year ending February 2018 versus the year ending January 2018.
...
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.4% in February. The 10-City and 20-City Composites both reported increases of 0.7%. After seasonal adjustment, the National Index recorded a 0.5% month-over-month increase in February. The 10-City and 20-City Composites both posted 0.8% month-over-month increases. All 20 cities reported increases in February before and after seasonal adjustment.

“Home prices continue to rise across the country,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The S&P CoreLogic Case-Shiller National Index is up 6.3% in the 12 months through February 2018. Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012. Over that time, the price increases averaged 6% per year. This run, which is still ongoing, compares to the previous long run from January 1992 to February 2007, 182 months, when prices averaged 6.1% annually. With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.

“Increasing employment supports rising home prices both nationally and locally. Among the 20 cities covered by the S&P CoreLogic Case-Shiller Indices, Seattle enjoyed both the largest gain in employment and in home prices over the 12 months ended in February 2018. At the other end of the scale, Chicago was ranked 19th in both home price and employment gains; Cleveland ranked 18th in home prices and 20th in employment increases. In San Francisco and Los Angeles, home price gains ranked much higher than would be expected from their employment increases, indicating that California home prices continue to rise faster than might be expected. In contrast, Miami home prices experienced some of the smaller increases despite better than average employment gains.”
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 1.6% from the peak, and up 0.7% in February (SA).

The Composite 20 index is 1.3% above the bubble peak, and up 0.8% (SA) in February.

The National index is 8.2% above the bubble peak (SA), and up 0.5% (SA) in February.  The National index is up 46.3% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 6.5% compared to February 2017.  The Composite 20 SA is up 6.8% year-over-year.

The National index SA is up 6.3% year-over-year.

Note: According to the data, prices increased in all 20 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

Monday, April 23, 2018

Tuesday: New Home Sales, Case-Shiller House Prices

by Bill McBride on 4/23/2018 08:16:00 PM

From Matthew Graham at Mortgage News Daily: NOW Mortgage Rates Are at 4-Year Highs

Mortgage rates moved markedly higher today, officially leaving them at new 4-year highs.
...
The average lender is quoting very well-qualified borrowers with huge downpayments something north of 4.5% on conventional 30yr fixed mortgages today. Let's call it 4.625%. Up until Friday, that number hadn't been over 4.5% except for on a few of those ill-fated February days. [30YR FIXED - 4.625%]
emphasis added
Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for February. The consensus is for a 6.2% year-over-year increase in the Comp 20 index for February.

• Also at 9:00 AM, FHFA House Price Index for February 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, New Home Sales for March from the Census Bureau. The consensus is for 630 thousand SAAR, up from 618 thousand in February.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for April.

Housing Inventory Tracking

by Bill McBride on 4/23/2018 04:48:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Here is a table from housing economist Tom Lawler showing the year-over-year (YoY) change for National inventory from the NAR, and the YoY change for California from the CAR.

It appears the YoY declines are slowing, and especially in California.

YOY % Change, Existing SF Homes for Sale
  NAR
(National)
CAR
(California)
Sep-17-8.4%-11.2%
Oct-17-10.4%-11.5%
Nov-17-9.7%-11.5%
Dec-17-11.5%-12.0%
Jan-18-9.5%-6.6%
Feb-18-8.6%-1.3%
Mar-18-7.2%-1.0%

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (through March), and also total existing home inventory as reported by the NAR (also through March 2018).

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 19% year-over-year in March (inventory still very low), and has increased year-over-year for six consecutive months. 

Also note the inventory is still down sharply in Las Vegas (red), but the YoY decline has been getting smaller.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.

Phoenix Real Estate in March: Sales up 3%, Inventory down 13% YoY

by Bill McBride on 4/23/2018 03:28:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in March were up 3.3% year-over-year (including homes, condos and manufactured homes).

2) Active inventory is now down 12.9% year-over-year. 

This is the seventeenth consecutive month with a YoY decrease in inventory.

March Residential Sales and Inventory, Greater Phoenix Area, ARMLS
  SalesYoY
Change
Sales
Cash
Sales
Percent
Cash
Active
Inventory
YoY
Change
Inventory
Mar-084,303---82219.1%57,0811---
Mar-097,63677.5%2,99439.2%49,743-12.9%
Mar-108,96917.5%3,74541.8%42,755-14.0%
Mar-119,92710.7%4,94649.8%37,632-12.0%
Mar-128,868-10.7%4,22247.6%21,863-41.9%
Mar-138,146-8.1%3,38441.5%20,729-5.2%
Mar-146,708-17.7%2,22233.1%30,16745.5%
Mar-157,88417.5%2,17227.5%26,623-11.7%
Mar-168,5558.5%2,10724.6%27,5803.6%
Mar-179,3048.8%2,22623.9%24,871-9.8%
Mar-189,6153.3%2,43525.3%21,669-12.9%
1 March 2008 probably included pending listings

A Few Comments on March Existing Home Sales

by Bill McBride on 4/23/2018 01:03:00 PM

Earlier: NAR: "Existing-Home Sales Climb 1.1 Percent in March"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus. See: Lawler: Early Read on Existing Home Sales in March.

2) Inventory is still very low and falling year-over-year (down 7.2% year-over-year in March). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.    This was the 34th consecutive month with a year-over-year decline in inventory.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in March (434,000, red column) were above sales in March 2017 (355,000, NSA).

Sales through March are down about 2% from the same period in 2017.   This is a small decline - and it is too early to tell if there is an impact from higher interest rates and / or the changes to the tax law on home sales.

NAR: "Existing-Home Sales Climb 1.1 Percent in March"

by Bill McBride on 4/23/2018 10:12:00 AM

From the NAR: Existing-Home Sales Climb 1.1 Percent in March

Existing-home sales grew for the second consecutive month in March, but lagging inventory levels and affordability constraints kept sales activity below year ago levels, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1 percent to a seasonally adjusted annual rate of 5.60 million in March from 5.54 million in February. Despite last month's increase, sales are still 1.2 percent below a year ago.
...
Total housing inventory at the end of March climbed 5.7 percent to 1.67 million existing homes available for sale, but is still 7.2 percent lower than a year ago (1.80 million) and has fallen year-over-year for 34 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace (3.8 months a year ago).
emphasis added
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March (5.60 million SAAR) were 1.1% higher than last month, but were 1.2% below the March 2017 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home Inventory According to the NAR, inventory increased to 1.67 million in March from 1.59 million in February.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory decreased 7.2% year-over-year in March compared to March 2017.  

Months of supply was at 3.6 months in March.

Sales were above the consensus view. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

Chicago Fed "Index points to a moderation in economic growth in March"

by Bill McBride on 4/23/2018 08:36:00 AM

From the Chicago Fed: Index points to a moderation in economic growth in March

Led by slower growth in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.10 in March from +0.98 in February. Three of the four broad categories of indicators that make up the index decreased from February, but two of the four categories made positive contributions to the index in March. The index’s three-month moving average, CFNAI-MA3, decreased to +0.27 in March from +0.31 in February.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed National Activity Index Click on graph for larger image.

This suggests economic activity was above the historical trend in February (using the three-month average).

According to the Chicago Fed:
The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

Sunday, April 22, 2018

Monday: Existing Home Sales

by Bill McBride on 4/22/2018 08:34:00 PM

Weekend:
Schedule for Week of Apr 22, 2018

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for March. This is a composite index of other data.

• At 10:00 AM, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.28 million SAAR, down from 5.54 million in February. Housing economist Tom Lawler estimates the NAR will reports sales of 5.51 million SAAR for March.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 16, and DOW futures are down 138 (fair value).

Oil prices were up over the last week with WTI futures at $68.22 per barrel and Brent at $73.91 per barrel.  A year ago, WTI was at $49, and Brent was at $50 - so oil prices are up about 40% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.76 per gallon. A year ago prices were at $2.42 per gallon - so gasoline prices are up 34 cents per gallon year-over-year.

Goldman: "Moving Beyond Full Employment"

by Bill McBride on 4/22/2018 11:53:00 AM

A few brief excerpts from a note by Goldman Sachs economist David Mericle:

... Are we really at full employment? Won’t job growth naturally slow down soon? Why is wage growth so much lower than in previous expansions? ...

We now see the labor market as at or a bit beyond full employment. ... we estimate a structural unemployment rate of about 4.5%, modestly above the current 4.1% rate. While the cyclical participation gap has recovered more slowly, it too now appears closed. A further cyclical boost to participation is possible, but we expect it to be quite limited.

Meanwhile, the pace of job creation shows no sign of slowing. ... We see little evidence that supply constraints will impose a forceful natural deceleration any time soon, and instead expect robust labor demand to drive the unemployment rate to 3.6% by end-2018 and 3.3% by end-2019, the lowest rate since the Korean War.

We have long stressed that wage growth expectations need to be recalibrated to the meager rate of productivity growth seen this cycle, implying a full employment rate of wage growth of roughly 3%. ... our wage tracker, now running at 2.5%, looks only moderately disappointing. ... signs of acceleration are emerging, notably in our wage survey leading indicator, now running at 3.2% ...
Mericle argues that the US economy is at or close to "full employment", that job gains will remain healthy for some time, and that wage growth is only "moderately disappointing".